Published 9:27 pm, Wednesday, November 14, 2012

The bottom line needs to be a balanced budget, not bruised political egos.

Schenectady Mayor Gary McCarthy and the City Council can't both be right when it comes to their two different budgets. Time will prove at least one of them wrong, and if the council's numbers are off, Schenectady could well end up the worse for it.

The council by a 5-1 vote on Tuesday overrode Mr. McCarthy's veto of their more optimistic budget, sparing taxpayers the 4.2 percent tax rate increase that the mayor proposed. The council came up with an admittedly more palatable 1.7 percent hike. That's well within the 2 percent cap the state has imposed on local governments and school districts, and undoubtedly more to the liking of property owners. The tax rate in Schenectady is already higher than most other cities in the state.

But such gratification may well be short-lived. The council may have bought citizens nothing more than a few months of illusory fiscal health.

Finance Commissioner Ismat Alam warns that the city will have a $4.1 million deficit by the end of 2013 under the council's budget, and Mr. McCarthy says he may not be able to make payroll by the end of next November. The council won't be able to tax its way out of those problems, and there won't be enough money in the city's dwindling reserves to cover such a shortfall. The only choice would be massive cuts or borrowing for a city whose bond rating just took a hit in September.

Moody's Investors Services downgraded Schenectady because it's above average in too many ways a city doesn't want to be — more debt, more unemployment, and more poverty than most New York cities. Delinquent property taxes are rising, and so are the city's costs.

Any mistakes the council has made now will only add to problems looming down the road. An audit by the state comptroller's office warns of persistent budget gaps in coming years, reaching $13.3 million in 2016. It would take tax hikes of at least 54 percent to close those gaps, and even more, warns Comptroller Tom DiNapoli, if the city's growing problems with collecting property taxes continue to worsen.

One of the bright spots in Mr. DiNapoli's audit is the observation that for all its fiscal woes, Schenectady has been doing a pretty good job of drafting realistic budgets and living within its means. And it could be that the council did just that again, and that Mr. McCarthy was only doing what many executives like to do — budget conservatively and give himself a nice cushion so, if nothing goes wrong, he can replenish the city's reserves. The city, in fact, has routinely projected much bigger deficits than it actually had since at least 2008.

And as the audit notes, Schenectady's finances have been slowly improving. A new program to encourage home ownership, the audit noted, could mean another $1 million in tax revenue next year alone. Not to mention a city with fewer vacant houses.

The city could plug even more of its budget if it could persuade its neighboring suburbs to adopt a single county-wide police force, which would save Schenectady an estimated $6 million a year. It's a case the city must continue to try to make.

A veto and an override are no small matters in a small city. It would be a disservice to citizens, though, if this signaled a hostile relationship between these two branches of local government. Mr. McCarthy should instead welcome the council's assurance that it will work with him throughout 2013 on the city's finances. Come this time next year, the two sides may need all the cooperation, not to mention fortitude, that they can muster.